Classifications of Obligations

Pure
Conditional
With a term
Alternative
Joint/Mancommunada
Solidary/Several/in solidum
Divisible
Indivisible
With a penal cause

Part 1: Pure and Conditional Obligations

Pure Obligation no term or condition (1179)
Conditional subject of a condition (future & uncertain & possible)
Postevent more of a basis of the contract

Kinds of Conditions
Suspensive & Resolutory
Potestative, Casual Mixed
Divisible & indivisible
Conjunctive & Alternative
Positive & Negative
Express & Implied
Possible & Impossible
Rules on Obligations with Condition
The fulfillment of the condition should NOT depend solely on the will of the debtor (1182)
[VOID]
Impossible conditions (contrary to good customs or public policy, prohibited by the law) shall
ANNUL the obligation w/c depends upon them (1183)
(Physical and Juridical Impossibility)
Condition that some event happen at a determinate time shall extinguish the obligation as soon
as the time expires or if it has become indubitable that the event will not take place (1184)
The condition shall be deemed fulfilled when the obligor voluntarily prevents it fulfillment
(1186)
Retroactivity of Obligation (1187)
Reservation of creditors rights (1188)
Rules when conditions have been implied w/ the intention of suspending efficacy of obligation
to give (1189)
Rules when resolutory condition has happened (1190)

Part 2: Obligations with a term

Term/Period is a space of time w/c, exerting an influence on obligations as a consequence of a
juridical act, suspends their demandability or determines their extinguishment
Requisites of a period
1. Future
2. Certain
3. Possible
- If the debtor bonds himself to pay when his means permit him to do so.
 Term/Period vs. Condition
Condition Term
1. As to fulfillment Uncertain event Must necessarily come
2. Influence on obligation Gives rise to an obligation or Affects the demandability or
extinguishes one already existing performance of obligation
3. As to time May refer to past event Always refer to the future
unknown to parties
4. As to will of debtor VOID Empowers the court to fix the
period

Rules on obligations with term

Loss or improvement of thing before arrival of day certain (1194)
Payment of delivery by mistake (1195)
Benefit of the term (1196)
Court may fix term (1197)
Loss of the term (1198)

Part 3: Alternative Obligations

Obligations with Several objects

1. Conjunctive where the debtor has to perform several obligations, it is extinguished only by the
performance of all of them.
2. Alternative several obligations being due, the fulfillment of one is sufficient determined by the
choice of the debtor who generally has the right of election.
3. Facultative only one thing is due but the debtor has reserved right to substitute it with
another.

Rules in Alternative Obligations

Election by the debtor, 1200
Notice of election, 1201
Obligation becomes simple, 1202
Impossibility due to creditor, 1203
Loss by fault of debtor, 1204
Selection by creditor, 1205

Facultative
Loss of substitute, 1206
When substitute is effective

Alternative vs. Facultative

Alternative Facultative
1. As to contents There are various prestations Only principal prestation
w/o constitute of the obligation constitutes obligation the
accessory being only a means to
facilitate payment
2. As to Nullity The nullity of one prestation Nullity of the principal prestation
does not invalidate the invalidates the obligation
obligation
 3. As to Choice The right to choose may be given Only debtor can choose the
to creditor substitute
4. As to effect of loss Only impossibility of all Impossibility of principal
prestations due w/o fault of the prestation extinguishes
debtor extinguishes obligation obligation

Part IV: Joint & Solidary Obligations

Joint each of the debtors is liable only for a proportionate part of the debt and each creditor is entitled
only to proportionate part of the credit (mancommunada or prorata)
Solidary each debtor is liable for the entire obligation & each creditor is entitles to demand the whole
obligation. (mancommunada solidaria, joint & several, in solidum)

J we promise to pay followed by 2 or more signatories

S I promise to pay followed by 2 or more signatories , individually and collectively, individually
liable, individually & jointly liable

Rules on Joint and Solidary Obligations

Joint character of obligations is presumed, 1208
In the joint divisible obligation, the defense of the res judicata is not extended from one debtor
to another.
Joint indivisible obligations when there are several debtors or creditors but prestation is
indivisible, the obligation is joint, unless solidarity is stipulated, 1209
Plurality of creditors if there are several creditors and only one debtor, the obligation can be
performed only by delivering the object to all creditors jointly.
Plurality of debtors the indivisible obligation can be performed by them only by acting
together.

Kinds of Solidarity
a. Active
b. Passive
c. Mixed

Active Solidarity each creditor has authority to claim and enforce the rights of all
Passive Solidarity each debtor can be made to answer for the others with right on the part of
the debtor-payor to recover from the others their respective shares
Each solidary creditor may do whatever is useful to the others but cannot do anything
prejudicial to the others, 1212
A solidary creditor cannot assign his rights without the consent of the others, 1213
The debtor may pay any of the solidary creditors but if any demand has been made by one of
them, the payment should be made to him
Novation, compensation, confusion, or emission by any of the solidary creditors extinguishes
obligation, 1215
The creditor may proceed against any one of the solidary debtors or some or all of them
simultaneously, 1216
Payment by one of the solidary debtors extinguishes the obligation. If two or more solidary
debtors offer to pay, the creditor may choose w/c offer to accept, 1217
Payment by a solidary debtor shall not entitle him to reimbursement if payment is made after
the obligation has prescribed or become illegal, 1218
 Remission of the whole obligation obtained by a solidary debtor does not entitle him to
reimbursement from the others, 1220
If the thing has been lost or if the prestation has become impossible w/o the fault of the solidary
debtors, the obligation shall be extinguished, 1221
If the thing is lost due to the fault of any of the solidary debtors, all shall be liable to the creditor
for the price of the damages

CIRCUMSTANCES AFFECTING OBLIGATIONS

Generic vs. Determinate things

Generic indicated only by its kinds w/o being designated and distinguished from others of the same
kind.
Determinate one that is individualized and can be identified or distinguished from others of its kind

3 INCIDENTAL OBLIGATIONS IN DELIVERY OF DETERMINATE THINGS

Obligation to preserve the thing with due care, 1163
Obligation to deliver the fruits, 1164
Obligation to deliver the accessories and accessions, 1166
1163:
Diligence required: Diligence of a good father of a family, 1173
Effects of breach of obligation: damages
1164:
The creditor is entitled to the fruits from the times of the obligation to deliver arises.
However, real right over the fruits arise only until delivery is made.
Ownership of the things is transferred not by mere agreements but by delivery.

Real right the direct and immediate juridical power over a thing, which is susceptible of being
exercised not only against a determinate person but against the whole world
(Right of ownership and possession)
Personal Right the power belonging to one person to demand or another as a definite passive subject
the fulfillment of an obligation

Remedies of creditor
1. Specific Performance
2. Action to rescind or resolve
3. Actions for damages
Specific Performance
1. If what is involved is generic thing, the delivery of anything belonging to the same species is
sufficient
2. If what is involved is determinate things, the thing itself should be delivered.

Imprisonment for Debt

Article IV, par. 13 of the Constitution provides that no person shall be imprisoned for debt.

Delay & Fortuitous Event

If the obligor delays, he shall be responsible for any fortuitous event.
1166:
Accessories things which, destined for the embellishment, use or preservation of another
thing of more importance, have for the object the completion of the latter for which they are
indispensible or convenient.
Ex. Machinery in a factory, tools of a machine, keys w/ receipt to a house.
Accessions include everything w/c is produced by a thing , or w/c is incorporated or attached
thereto, either naturally or artificially.

Delay delay in the fulfillment of obligation, not fulfillment with respect to time.
- Delay in positive obligations (to do and to give)
- No delay in negative obligations (not to do and not to give)
Kinds of Delay 1166
1. Delay on the part of the debtor
Requisites
o Obligation is demandable and liquidated
o Debtor delays performance
o Creditor requires the performance judicially or extra judicially
Demand necessary even if there is a period fixed in the obligation
When demand is not required:
o Where there is an express stipulation of that effect
o Where the law so provides
o When the period is the controlling motive for the obligation
o Where demand would be useless
Effects of delay of debtor:
o When it has for its objects a determine thing
o The debtor becomes liable for damages for the delay
2. Delay on the part of the creditor
Performance of the necessary cooperation, especially acceptance
Requisites:
o An offer of performance by the debtor who has the required capacity
o The offer must be to comply with the with the prestation as it should be
presented
o The creditor refuses the performance without just cause.
effects of delay of the creditor
o responsibility of the debtor for thing is reduced and limited to fraud and gross
negligence
o the debtor is exempted from the risks of loss of the thing
o all expenses incurred by the debtor for the preservation of the thing after shall
be chargeable to the creditor
o if the obligation bears interest, the debtor does not have to pay from the
moment of delay
o the creditor becomes liable for damages
o the debtor may relieve himself of the obligation by the consignation of the thing
3. Delay of both parties in reappeal obligations
In reciprocal obligations, fulfillment must be simultaneous. Neither party incurs in delay
if the other does not comply with what is incumbent on him
Fraud non-performance by fraud 1170
- Voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects
which necessarily arise from such act or omission
 - Partly guilty of fraud is liable for damages
- Action for future fraud cannot be renounced 1171
Negligence negligence omission of the diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the place.
- Aversion of fact
Fortuitous Event 1174
Force measure an event which takes place by accident and could hot have been
foreseen (1) by nature and (2) by act of man
Characteristics of fortuitous event
o Cause must be independent of the human will
o Must be impossible to foresee
o Occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner
o The obligator must be free from any participation in the aggravation of the
injury resulting to the creditor.
Receipt of Principal/Interest
Provision on loan 1176
o The receipts by the creditor of the principal without reservation regarding
(a)interest gives rise to the presumption that the interest has been paid.
o The receipt of a later installment of a debt without reservation as to prior
installments raises to presumption that the installments have been paid.
Duties of obligor in obligations to do or not to do
Performance at debtors cost 1167
o Execution of obligation at debtors cost:
If debtor fails to do his obligation
If the debtor does the obligation contrary to the obligation
The only remedy is to recover damages
o Doing prohibited thing 1168
Liability of obligor:
It shall be undone at his exxoense
Damages
Extinguishment of obligations
Modes of extinguishment of obligations
o Payment of performance
o Loss of the thing due
o Coadunation or remission of debt
o Confusion or merger of the rights of the debtor
o Compensation
o Novation
o Others: annulment, rescission, fulfillment of resolutary condition, prescription

Payment or performance 1232

Payment is the fulfillment of the prestation due
o Requisites:
Person who pays
Person whom payment is made
Thing to be paid
Manner/time/place of payment
 Kinds of payment
o Normal voluntary
o Abnormal forced by means of judicial proceeding
Requisites for payment - 1233:
o Identity
o Integrity
Substantial performance 1234
o If there is substantial performance in good faith, the obligor may recover as
though there has been strict and complete fulfillment
o There is substantial performance if there was an attempt in good faith to
perform without any willful or international departure there from.
Waiver of defect in performance 1235
o When the obligee accepts the performance knowing its incompleteness or
irregularity and without expressing any protest or objection, the obligation is
deemed fully complied with
Performance by third party 1236
o Creditor is not bound to accept payment or performance by a third person,
unless there iss contrary stipulation
o Whoever paid for another may demand for reimbursement, unless payment
was without the knowledge or against the will of the debtor. In such case, the
payor shall recover only insofar as the payment has been beneficial to the
debtor.
o Payment by a third person who does not intend to be reimbursed is a donation,
w/c requires debtors consent, 1238
o The payment shall be valid as to the creditor who accepts it
Incapacity to pay, 1239
o In obligations to give, payment made by one who does not have free disrousal
of the thing due & capacity to alienate it shall not be valid
To whom payment is made, 1240
o One in whose favor the obligation is constituted
o To any authorized person
Payment to incapacitated, 1241
Valid if:
o He has kept the thing delivered
o In so far as payment is beneficial to him
Payment to 3rd person shall be void in so far as it has redounded to the benefit of the
creditor
Benefit to creditor is not required to be proved:
o If after payment, creditor acquires to creditors rights;
o If the creditor ratifies the payment to the 3rd person
o If by creditors conduct, the debtor has been led to believe that the third person
has authority to receive payment
Corporations General Provisions

Definition of a corporation:
a. A corporation is an artificial being
b. Created by operation of law
c. With right of succession
d. Only has powers, attributes and properties expressly authorized by law or incident to its
existence

Article 44, civil code: the ff: are juridical persons:

Corporations, partnerships & associations to which law grants a juridical

Concepts and Classifications of Contracts

Definition of contract
Art. 1305, Civil code:
- A contract is a meeting of minds between two different parties whereby one binds himself, with
respect to the other, to give something or to render some service.

Characteristics of a contract (ROMA)

o Relativity, 1311
o Obligatory and Consensual 1315
o Mutuality, 1308
o Autonomy, 1306
Stipulations Pour Atrui

General Rule: Relativity of contracts

Exception: benefits deliberately conferred by parties to a contract upon third persons

Requisites:
1. Stipulations must be part, not whole of the contract
2. Contracting parties must have clearly & deliberately conferred a favor upon 3rd persons
3. Third person must have communicated his acceptance
4. Neither after contracting parties represent the 3rd person

Classifications of Contracts(CRS)
1. Consensual perfected by mere meeting of minds of parties
2. Real contracts require delivery for perfection
3. Solemn Contracts contracts w/c must appear in writing
o Donations of real estate or movable worth 5000
o Transfer of large cattle
o Stipulation to pay interest in bans
o Partnership to w/c immovable are contributed
o Stipulation limiting carriers liability to less than extra-ordinary essential diligence

Elements of Contract (COC)

1. Consent
2. Object
3. Cause
Elements of Consent
1. Legal capacity of contracting parties
2. Manifestation of conformity of contracting parties
3. Parties conformity to the terms and conditions of the contract must be intelligent, spontaneous
and free from all vices
4. The conformity must be real

Requisites of valid consent

1. Intelligent (w/o error, mistake, fraud, violence, intimidation or undue influence)
2. Free
3. Spontaneous

Kinds of Simulated Contract, 1325

1. Absolute the contracting parties do not intend to be bound by the contract at all, thus, the
contract is void.
2. Relative the parties conceal their agreement.

Contract of Adhesion
- A contract prepared by a party containing all the terms & conditions he desires w/c the other
party may sign if he wants to enter into the contract

Elements of valid offer & acceptance, 1319 (DIC)

1. Definite
2. Intentional
3. Complete

When offer becomes ineffective

o Death, civil interdiction, insanity or insolvency of either party before acceptance is conveyed,
1323
o Express or implied revocation of the (oferror) offer by the offeree, 1324
o Qualified or conditional acceptance of the offer w/c becomes counter offer, 1319
o Subject matter become illegal or impossible before acceptance is communicated.

Rule on Advertisements
o Business advertisements of things for sale are note definite offers, but more invitations to make
an offer, 1325
o Advertisements for bidders are simple invitations to make proposals & the advertiser is not
bound to accept the highest bidder or lowest bidder, unless the contrary appears, 1326

Option
o Option may be withdrawn before acceptance is communicated, except when supported by
consideration other than purchase period, 1324

Requisites of a valid acceptance

o Absolute a qualified acceptance becomes a counter-offer
No specified form but when the offeror prescribed a form, the said form should be followed
(1320, 1321)

Requisites of a valid object

 o Determinate as to kind (even if not determinate provided it is possible to determine the same
w/o need of a new contract), 1349
o Existing or w/ potential to exist
o Licit
o Within the commerce of man
o Transmissible

Invalid object of a contract

o Things outside the commerce of men, 1327
o Intransmissible rights
o Future inheritance, except in cases authorized by law
o Services w/c are contrary to law, morals, good customs, public order or public policy, 1348
o Impossible things or services
o Objects w/c are not possible of determination as to their kind

Requisites for cause

1. Exists
2. True
3. Licit

Presumptions on cause
1. Exists
2. Lawful

Kinds of causes, 1350

o Onerous contracts: the prestation or promise of a thing or service of another
o Remunetory contracts: service or benefit remunerated
o Gratuitous contracts: the liberality of the donor or benefactor
o Accessory: identical with cause of main contract

Cause vs. Motive, 1351

Cause Motive
Direct and must proximate reason of a contract Indirect or remote reason
Objective and juridical reason of a contract Psychological and purely personal reason
Legality or illegality of cause affects the existence Legality or illegality of motive does not affect the
or validity of the contract existence or validity of the contract
Cause is always same for each contracting party Motive differs for each contracting party

Error of cause
o Absence of cause: confers no right & produces no legal effect
o Failure of cause: does not render the contract void
o Illegality of cause: contract is null & void
o Falsity of cause: contract is void unless the parties show there is a valid & lawful cause
o Lesion or inadequacy of cause: does not invalidate the contract

Lesion of cause invalidates a contract if:

o There is fraud, mistake or undue influence;
 o When the parties intended a donation or some other contract cases specified by law (contracts
where ward suffers 25% lesion)

Formality of contract
General rule:
o Contracts shall be obligatory on whatever form they may have been entered into, provided all
essential requisites for their validity are present, 1356
Exception:
o Contracts must be in a certain form when the law requires that a contract be in some form to
be:
1. Valid
2. Enforceable
3. For the convenience of the parties
Parties may compel each other to reduce agreement into writing.

Contracts w/ specific requirements for perfection:

1. Donation of real property & personal property w/ value of 5000
a. Donation must be in public instrument
b. Acceptance must be written whether in the same deed of donation or in a separate
instrument
c. If acceptance is in a separate instrument, the donee must be notified in an authentic
form.
2. Partnership where real property is contributed:
a. Public instrument regarding the partnership
b. Inventory of the realty must be made
Antichrests: the amount of principal & interest must be in writing
Agency: authority of the agent must be in writing

Stipulation to change interest: must be in writing

Chattel mortgage: personal property must be recorded in chattel mortgage registry

Stipulation limiting common carriers liability to ordinary diligence:

a. Must be in writing signed by shipper or owner
b. Supported by valuable consideration
c. Reasonable, just and not contrary to public policy

Formalities of Contract
Pledge Real Mortgage Chattel Mortgage Antichresis
1. Object Movables Immovables Movables Immovables
2. Perfection Delivery Consent Recorded in In writing
registry
3. Public Bind 3rd Persons Bind 3rd Persons Bind 3rd Persons For convenience
Document
4. Registration Not necessary Necessary to Registration w/ Not necessitate
bind 3rd persons chattel mortgage registration
5. Remedy in Deficiency Can be Can be Can be
case of cannot be recovered recovered recovered
 deficiency in recovered
foreclosure
6. Use of Not allowed Impossible since Impossible Allowed & fruits
thing/security unless thing is not w/ will be applied to
authorized by mortgage changes &
user interest on
principal debt
7. Transfer of Not transferred Not transferred Not transferred Not transferred
ownership

Formalities of Contract
Commodation Mutuum Deposit
Object Moveable or Money or consumable Moveable or
Immoveable Immoveable
Perfection Delivery Delivery Delivery
Cause Gratuitous Gratuitous or onerous Presumed Gratuitous

Reformation of Contract
- Reformation of instrument: remedy to conform to the real intention of the parties due to
mistake, fraud, inequitable conduct, or accident, 1359

Requisites in reformation of instruments:

1. Meeting of minds to the contract
2. True intention is not expressed in the contract
3. By reason of mistake, accident, relative simulation, fraud or inequitable conduct
4. Clear and convincing proof of the foregoing

Not allowed reformation of instruments

1. Simple, unconditional donations intervivos
2. Wills
3. When the agreement is void
4. When an action to enforce the instrument is filed (estoppel)
Prescriptive period in reformation: 10 years from date of execution

Who may ask for the reformation of instrument?

o Mutual mistake: either party or his successors in interest
o Upon petition of the injured party
o Heirs & assigns of the injured party

Interpretation of Contracts
Literal meaning rule: if the terms of the contract are clear, the literal meaning of the stipulations shall
prevail, 1370
Literal meaning vs. Intention: the intention shall prevail, 1370
Intent: Contemporaneous & subsequent acts shall be considered, 1371

Specific rules:
1. General terms do not include things w/c are distinct & cases different from those upon w/c the
parties intended to agree, 1372
 2. Stipulations with several meanings shall be interpreted to render the stipulation effectual, 1373
3. Stipulations in a contract shall be interpreted together, 1374
4. Customs: used in interpretation of ambiguities or to fill omissions, 1376
5. Interpretation of obscure words shall not favor party who caused obscurity, 1377
6. Least transmission of rights: in resolving doubts incidental to gratuitous contracts
7. Greatest reciprocity: in setting doubts in onerous contracts

Defective Contracts
- Status of Contracts
o Valid
o Void
o Voidable
o Rescissible
o Unenforceable
o Inexistent

Rescissible contracts: those w/c have caused particular economic damage either to one of the parties or
to a third person and w/c may be set aside in whole or in part to the extent of the damage caused, 1381

Types of rescissible contracts

o Entered into by guardian whenever a ward suffers damage more than of value of property
o Undertaken in fraud of creditors when the latter cannot collect the claims due them
o Those w/c refer to things under litigation if they have been entered into by the defendants w/o
the knowledge or approval of the litigants or competent judicial authority
o Those agreed upon in representation of the of absentees if the latter suffer lesion of
o Payment by an insolvent on debts w/c are not yet due & prejudices claim of others
o As provided by law: 1526, 1534, 1538, 1539, 1542, 1556, 1560, 1567, 1659

Payment made in state of insolvency:

a. Plaintiff has no other means to maintain reparation
b. Plaintiff must be able to return whatever he may be obliged to return due to rescission
c. The things must not have been passed to third persons in good faith
d. It must be made w/ in 4 years

Rescission vs. Resolution

Resolution Rescission
Nature Principal action, retaliatory Subsidiary remedy
Grounds Non-performance of contract 5 grounds under art. 1381: non-
performance is not important
Applicability Only to reciprocal obligations Both unilateral and reciprocal
obligations
Initiating party Only injured party who is party Even third persons may bring the
to the contract action
Purpose Cancellation of contract Reparation for damage or injury,
allowing partial rescission of
contract
Mutual Restitution: the obligation created by the rescission of contract.
- Rescission is possible only when the person demanding rescission can return whatever he may
be obliged to restore.

When mutual restitution is not possible:

o Creditor did not receive anything from the contract;
o Thing is already in possession of 3rd person in good faith;
o Subject to indemnity only

Characteristics of right to rescind

o Can be demanded only if plaintiff is ready, willing and able to comply with his own obligation
and defendant is not;
o Not absolute
o Needs juridical approval in case of no provision allowing for extrajudicial rescission;
o Subject to judicial review if availed extrajudicially
o May be waived
o Implied to exist in reciprocal obligations

General rule: the injured party can only choose between fulfillment and rescission of the obligation and
cannot have both.
Exception: if fulfillment has become impossible, article 1191 allows injured party to seek rescission even
after he has chosen fulfillment.

Prescriptive period of rescission:

Under art. 1381 (1): 4 years from termination of incapacity of ward
Under (2): 4 years from time the domicile of absentee is known
(3)(4): 4 years from time of discovery fraud

Characteristics of voidable contracts:

o Effective until set aside
o May be assailed or attacked only in an action for that purpose
o Can be confirmed; and
o Can be assailed only be the party whose consent was defective or his heirs or assigns
When is there voidable contracts:
- One of the parties is incapacitated to give consent; or consent was vitiated.

Who are incapacitated to give consent:

o Deaf mutes who do not know how to read and write;
o Insane or demented persons unless the consent was given during a lucid interval
o Minors, except:
Contracts for recessaries
Contract by legal guardians or representatives
There is active misrepresentation on the part of minor
Contracts of deposit w/ the bank provided the minor is 7 years of age
Upon reaching age of majority, they ratify the same

Vices of consent: (MIVUF)

 1. Mistake substantial mistake, and not merely an accidental mistake. It must refer to the
substance of the subject or conditions w/c have principally moved one or both parties to enter
into the contract.
Mistake as to identify or qualifications of one of the parties will vitiate consent only if such
identity or qualifications has been the principal cause of the contract.
2. Intimidation an internal moral force operating in the will and inducing performance of an act.
3. Violence an external, serious or irresistible force exerted upon a person to prevent him from
doing something or compel him to do an act.
4. Undue influence any means employed upon a party which, under the circumstances could not
be resisted and has the effect of controlling his volition and inducing him to give his consent to
the contract.
5. Fraud use of insidious words or machinations inducing another party to enter into the
contract, w/c without them, he would not have agreed.

Kinds of mistake
1. Mistake of fact when one or both of the contracting parties believe that a fact exists when in
reality, it does not or the other party way around.
2. Mistake of Law when one or both parties arrive at an erroneous conclusion or interpretation
of a question of law or legal effects of a certain act or transaction.

In general, mistake of facts results in a voidable contract.

Exception: when mistake of law involves error as to effect of an agreement when the real purpose
of the parties is frustrated.

Requisites of intimidation
o One of the parties is compelled to give his consent by a reasonable and well grounded fear
of an evil
o The evil must be imminent & grave
o It must be unjust
o The evil must be the determining cause for the party upon whom it is employed in entering
into the contract.

Requisites of Violence
o Violence must be serious or irresistible; and
o It must be the determining cause for the party upon whom it is employed in entering into
the contract.

Kinds of fraud:
- Fraud in the perfection of a contract:
a. Casual fraud (dolo causante)
b. Incidental fraud (dolo incidente)
- Fraud in the performance of a contract

Requisites of fraud
o Fraud, insidious words or machinations must have been employed by one of the contracting
parties;
o It must have been serious
o It induced the other party to enter into the contract; &
o Should not have been employed by both contracting parties or by third persons
 - It is dolo causante that makes the contract voidable.
- Dolo incidente will only make a party liable for damages.

Who may institute an action to annul a contract

o By all who are thereby obliged principally or subsidiarily
o He who has capacity to contract may invoke the incapacity to the party with whom he has
contracted
o A third person who is stranger to the contract cannot institute an action for annulment.

What are the effects of annulment of a contract

o If the contract is not yet consummated parties shall be released from the obligations arising
therefrom
o If the contract has already been consummated rules provided in articles 1398 1402 shall
govern.

What is ratification?
- It is an act by which a contract entered into in behalf of another w/o or in excess of authority is
cared of its defect.

What is unenforceable contracts?

o Those entered into w/o or in excess of authority;
o Those that do not comply with the statute of fraud (1403), i.e. not in writing nor subscribed by
the party charged or by his agent
o Those where both contracting parties are incapable of giving consent.

Two ways of ratifying contracts w/ infringe statute of frauds

1. Failure to object during the trial to the admissibility of parol evidence to support a contract
covered by the statute of frauds.
2. Acceptance of benefits when the contract has been partly executed because estoppel sets in
by accepting performance

Kinds of void contract

- Those lacking in essential elements: no consent, no object, no cause
a. Those which are absolutely simulated or fictitious: no cause
b. Those whose cause or object did not exist at the time of the transaction: no cause or
object
c. Those whose object is outside the commerce of man: no object
d. Those where the intention of parties relative to the principal object of contract cannot
be ascertained.

Contracts prohibited by law

a. Pactum commisorium creditor appropriates to himself the thing given by way of pledge or
mortgage to fulfill the debt
b. Pactum de non alrenado an agreement prohibiting the owner from alienating the mortgaged
immoveable
c. Pactum leonine a stipulation in a partnership agreement w/c excludes one or more parties
from any share in the profits or losses
Illegal or illicit contracts
 Void vs. Voidable Contracts
Void Voidable
Absence of essential elements of a contract Consent is vitiated or the incapacity to give
consent
No effect even if not set aside Valid contract until set aside
Cannot be ratified Can be ratified
Nullity can be set up against any person asserting Nullity can be set up only against a party thereto
from it, and his successors
Action to nullify does not prescribe Action to annul prescribes in 4 years